Buyer Beware – the danger of supervised neglect
If you are looking to acquire a practice with a Full Care Plan, the monthly income can look very attractive. However, it is critical that you carry out due diligence on the plan, not only to establish the facts around all the areas discussed in previous Blogs, but also to identify any possible supervised neglect of patients.
Once you have completed the sale and purchase agreement it is too late to mitigate losses and risks associated with supervised neglect.
Practice is purchased which has 1,000 patients on Full Care currently generating £350k of revenue to the business. Previous owner is retiring from dentistry and leaves the practice upon completion of the sale. New owner commences seeing patients and realises very quickly that most of the patients require dental treatment. There is active dental disease, poorly carried out restorations, fillings placed on top of decay.
Patients are not willing to accept that the previous owner neglected their dental health, their loyalty lies with the retiring dentist and not the new practice owner with whom they have not established a relationship yet. Who is going to pay for the remedial treatment required? Not the patient.
The new owner has to decide when and how they are going to broach the delicate subject with the patient, that they require a great deal of treatment to bring them back to dental health. Hours of treatment are required, and it will possibly mean the patient will need to be moved to a higher band. Should they wait until they have established a relationship with the patient? No – because they are then falling into the same trap of supervised neglect.
This situation is awful for the new owner. A due diligence audit prior to completion would have identified the issues and money could have been placed in escrow to allow for treatment costs, or the sale price of the practice could have been reduced to reflect the significant risk to the buyer.
What to do:
If you are looking to buy a practice with a Full Care Plan, do undertake an audit as part of the due diligence. Use the results to strengthen your negotiating position or withdraw from the purchase.
Privilege Plan provide comprehensive Full Care Audits either as part of a due diligence for practice acquisition or as part of your internal audit requirements. Email email@example.com for further information.